'Legalist' Startup Automates The Lawsuit Strategy Peter Thiel Used To Bankrupt Gawker (gizmodo.com)

An anonymous reader writes from a report via Gizmodo: "Two Harvard undergraduates have created a service called Legalist that uses what they call 'data-backed litigation financing,' analyzing civil lawsuits with an algorithm to predict case outcomes and determine which civil lawsuits are worth investing in," reports Gizmodo. The process is very similar to what billionaire Peter Thiel did when he secretly funded a lawsuit from Hulk Hogan against Gawker Media. "Legalist says it uses an algorithm of 58 different variables including, as [Legalist cofounder] Eva Shang told the Silicon Valley Business Journal, who the presiding judge is and the number of cases the judge is currently working on. The algorithm has been fed cases dating back to 1989 and helps people figure out how long a case will last and the risks associated with it. In a presentation at Y Combinator's Demo Day on Tuesday [Legalist was developed as part of Y Combinator's Summer 2016 class], the founders claimed that the startup funded one lawsuit for $75,000 and expects a return of more than $1 million. Shang says the $1.40 is earned for every $1 spent in litigation financing, which can prove to be a profitable enterprise when you're spending hundreds of thousands of dollars." Shang told Business Insider in reference to the Gawker lawsuit, "That's the kind of thing we're staying away from here." The company will supposedly be focusing on commercial and small-business lawsuits, and will not be backing lawsuits by individuals.

Comments

Pro tip

[Anonymous Coward]

If you don't want to be bankrupted, don't post a nude sex tape of someone who was filmed without his knowledge, and then ignore a court order to take it down. Just saying.

Re:Pro tip

[gilgongo]

If you don't want to be bankrupted, don't post a nude sex tape of someone who was filmed without his knowledge, and then ignore a court order to take it down. Just saying.

Well then, you'll have good answers to all these questions , I assume.

Re:Pro tip

[Anonymous Coward]

Let me try to answer those questions? They seem quite biased and misleading, so I want to separate out the bias as best I can.

- Judges commented the story was newsworthy and protected? Sounds good to me, but the sex video and the news aren't the same thing.

- Size of the award? The average wrongful death case is worth about 1 million dollars. Sounds about right. This 'news' cost Hogan millions of dollars though, both current and future. I have no problem whatsoever with him trying to get back what he lost, with punitive damages added on. If this wasn't possible, a billionaire could ruin their billionaire competitor and expect it to cost him a mere million dollars. The only shame here is that Hogan's net worth was so many millions of dollars that could so easily be destroyed.

- Gawker's Employees? Oh come on now. They didn't receive a death penalty, virtual or otherwise. If they're journalists they'll move on. If they're literally unemployable now due to having been tainted by Gawker, then yes Gawker had to die. And it was hardly just one lapse in editorial judgement. It was a lapse in judgement which followed a pattern of lapses of judgement, followed by contempt of a court order.

- Should Gawker have been barred from appealing before declaring bankrupty? Gawker, like any other company, had to post a bond before appealing. They didn't do so, therefore they couldn't appeal. This wasn't a malicious attack on Gawker by the judge as the article claims. This law is to prevent companies from burning through their funds in appeals (sometimes paying out to related companies, sometimes just receiving kickbacks, sometimes just out of pure spite) to avoid paying the judgement.

- If I think Thiel's outing or other distasteful stories deserved punishment? No. Those are protected speech. That doesn't make me like Gawker any more though, or feel that they deserve no punishment when they did cross the line.

- Libel suits and legal threats? No, I don't agree with money shutting down a business due to death of a thousand cuts. Merits of the case should decide legal issues, not the size of the pockets. If the libel suits were clear first-amendment cases that any first year law student would have rejected, why didn't Gawker countersue to recover costs? Could it be they aren't so cut and dried?

- Might the same thing happen to sites I like? Possibly. But if they're such corrosive assholes as to establish a pattern of maliciousness, go beyond the boundaries protected by the law, and then ignore a court order... I'd have no more sympathy for that hypothetical site simply because I like them. I also can't imagine why I'd like them... but that's another matter entirely.

- Is it wrong to bar Gawker from paying the defense of their editor or other reporters being sued? Well, considering they're already bankrupt and on the hook for millions they'll never pay, no it's not wrong. They can't pay their friendly lawyers to avoid paying their judgement. A return question: Would Gawker have paid for any of these defenses if they hadn't already lost a 140 million dollar judgement and weren't already bankrupt? It's easy to take the high ground when it costs you literally nothing.

- Should other gossip magazines be driven out of business by deep pockets? No. They should be driven out of business by the legal system if anything. If a case has no merits then it shouldn't matter how much money drives it. Anyone who wants to get money out of lawsuits, think about the original case... Hogan couldn't have sued Gawker for destroying his life because he didn't have the money to take on a multi-million dollar organization who spends more money on libel defense than on journalism. Without Thiel or someone like him, the case could never have been decided on its merits.

Big surprise some jackhole Silicon Valley

[hsmith]

startup wanted to cash in on this. Lawsuits as a Service! Can't wait until this extends to software patent litigation.

Re:Big surprise some jackhole Silicon Valley

[ShanghaiBill]

startup wanted to cash in on this. Lawsuits as a Service! Can't wait until this extends to software patent litigation.

If there is a problem with the legal system, then the solution is to fix that problem rather than deny people access to the courts. This app is a Good Thing if it means that normal people can have the same access to justice as billionaires like Peter.

Re:Big surprise some jackhole Silicon Valley

[Pfhorrest]

That was my thought as well, that this sounds like an awesome way of helping (at least some) people get access to the justice they deserve, until they got to the part about not helping lawsuits by individuals, only businesses.

End is Nigh

[transami]

Awesome. Unleashing AI and Big Data on the Law. The fireworks are going to be awesome on this one. I give it 10 maybe 20 years before the whole system implodes. Everyone will be sued into oblivion.

Re:End is Nigh

[rtb61]

You have no idea, how mass for profit law suits could screw up the system, just a year or two will be enough to collapse the courts and cripple industry.

Credibility of the system

[quantaman]

"Legalist says it uses an algorithm of 58 different variables including, as [Legalist cofounder] Eva Shang told the Silicon Valley Business Journal, who the presiding judge is

That different judges give different outcomes is already common knowledge but putting an actual dollar value on it might have significant repercussions.

What happens when someone asks for a judge to recuse themselves because the litigation value tripled when the judge got assigned? It's a lot harder to defend the integrity of the system when supposedly impartial actors have quantifiable effects.

Re:Credibility of the system

[jenningsthecat]

It's a lot harder to defend the integrity of the system when supposedly impartial actors have quantifiable effects.

With that in mind, and given that algorithms, (and soon big data as well?), are now significant factors in the justice system, can 'algorithmic judges' be far behind? The court system will push back; but inevitably, the job of judging will have to at least be informed by computerized analyses of pertinent data. And eventually, the position of judge might simply be taken over by AI. Yes, that's a long way off, if it ever happens at all - but developments such as 'lawsuit as investment' are among many factors that will further drive the development of artificial intelligence.

On a side note, I seem to recall something recently about automation being poised to take over something like 40% of law practice jobs in the next couple of decades. It seems that even the law biz isn't immune from digital disruption.

Definition of a broken system.

[Harlequin80]

When your legal system becomes the realm of financial investment trading you KNOW your system is broken.

I look forward to the creation of a new stock exchange. Lets call it LAWDAC. You can now day trade on court cases.

Re:Definition of a broken system.

[jenningsthecat]

When your legal system becomes the realm of financial investment trading you KNOW your system is broken.

When your political system becomes the realm of financial investment trading you KNOW the legal system isn't far behind and your society is well and truly fucked.

Just what America needs

[Applehu Akbar]

Let Asians build the world's fastest trains and the continent-wide energy systems we can only dream about. We have lawsuit AI technology we can use to rob each other blind as we cash those unemployment checks.

Re:The losing side must automatically pay

[110010001000]

Good idea. No one would ever dare to sue any corporation, because if they lost they would be broke after paying the legal fees of the corporate lawyers. Corporations would rule everything!

A better pro tip

[Anonymous Coward]

And if you were the Supreme Court, they would have listened to you. Thing is: Gawker didn't know that and thought they were on firm legal ground. If they knew this would happen they wouldn't have done it. This is the problem: You don't find out if you're right or wrong until you've paid lawyers millions of dollars. Shouldn't be like that.

The courts are a crapshoot. With a different judge and jury, Hogan and Thiel could have lost.

Also "Two Harvard undergraduates" This is why everyone hates Harvard.

Re:Peter Thiel didn't bankrupt Gawker

[TroII]

I wonder how many c-list celebrities would post their own sex tapes on the internet if they knew they could be multi-millionaires because of it.

How, by suing themselves? This scheme only works when someone else posts the tape unlawfully. If the Hulkster had posted the video himself, he wouldn't have Gawker's money.

Another mark of a failing economy

[Opportunist]

We used to invest in businesses, who then provided goods and services to customers. That's a thing of the past, simply because the number of people who actually have money left to buy crap isn't enough to make this investment viable.

So the logical next step is to invest in lawsuits. Here you needn't provide a service someone wants, you can actually force him to pay.

Re:OMG, a months rent!

[DarkOx]

The loss of a month's rent once ruined an entire goddamn year and nearly left me homeless. I'm not in quite such dire straights myself anymore, but I still can't afford to risk that much fucking money; and more to the general point, the vast majority of Americans definitely can't.

False: 83% of American households have some form of subscription television service. 3-4 months of that would cover at least enough of a mid market law firms time to assess the merits of case. What you really mean is most Americas don't believe strongly enough in their own cases to do without the boob tube for a quarter.

Sorry life is about choices and the truth is here in the US most people actually do have them. Almost all US household statistics greatly under report the income of the poor. They don't take into account things like the EIT for example. I am not say there are not many people in the US who are struggling, but we are actually talking about a very tiny minority when you want talk about the those who can't scrape $300-$500 together to have someone evaluate a case where they have a legitimate grievance.

We also have these things called public libraries were ordinary citizens like you or I could get access to either online resources or request the reference books needed to get an idea if our case was worth having a professional spend an hour looking at, and we could not afford to chance it based on a guess.